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1 High-Growth, High-Yield Stock Income Investors Have Likely Never Heard About

CNX Midstream Partners LP(NYSE: CNXM) is likely a name few investors have ever come across. On the one hand, that's not all that surprising since the company just started using it earlier this year, though few probably knew it by its former name, either. While the company has flown under the radar thus far, it's a name that income-seeking investors will want to get to know given the income growth it has coming down the pipeline.

CNX Midstream Partners 101

CNX Midstream Partners rebranded itself to start 2018. Before that, the MLP was called CONE Midstream and controlled by CONSOL Energy's natural gas division, now CNX Resources(NYSE: CNX), and Noble Energy(NYSE: NBL). Those companies have undergone several changes in recent months, with CONSOL spinning off CNX Resources last year while Noble Energy sold its natural gas business in the Appalachian region to a private equity fund and its stake in CONE's parent to CNX Resources.

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The renamed entity currently controls several midstream assets serving the Marcellus and Utica shale plays, backed primarily by long-term contracts with CNX Resources, which supply the bulk of its cash flow to support its current 6.5%-yielding distribution. In addition to that, it owns 5% stakes in two midstream development companies, which support the growth of CNX Resources, as well as the private equity buyer of Noble Energy's assets.

What's coming down the pipeline

CNX Resources currently expects to grow its natural gas volumes at a 23% compound annual growth rate over the next five years in regions served by CNX Midstream's core assets. To facilitate that expansion program, the MLP will need to build additional natural gas gathering lines to move this growing stream of production from those future wells. In addition to that, the company will benefit from the continued expansion of the midstream development companies. This organic volume growth alone should support 15% annual distribution growth at CNX Midstream through 2022. Furthermore, the company can deliver that high growth rate while maintaining excellent financial metrics, including covering its distribution with cash flow by around 1.4 times in the near term, while keeping leverage to less than 3.0 times debt-to-EBITDA. For comparison's sake, most MLPs cover their payouts by about 1.1 times and have leverage ratios above 4.0 times.

CNX Midstream has ample upside beyond that base plan because it has the option to purchase assets built by the development companies, as well as others owned by its parent. The company recently completed one such deal, buying the 95% interest it didn't already own in a gas-gathering system in West Virginia from CNX Resources for $265 million in February. That was the first drop-down transaction since CNX bought out Noble Energy's stake. While CNX Midstream's growth plan doesn't include any upside from further drop-downs, there's substantial potential since these assets could generate $200 million in annual earnings by 2020, which is significant considering that CNX Midstream is only on pace to produce $150 million in earnings this year.

On top of the internal growth, CNX Midstream has additional upside potential if it chooses to acquire assets from third parties or invest in building more than just natural gas gathering pipelines. Many of its peers have also spent money on natural gas processing plants and long-haul pipelines to diversify their revenue streams.

An attractive option for income seekers

CNX Midstream offers a well-supported distribution that currently yields 6.5%, with clear line of sight to increase that payout at a 15% annual clip through 2022. On top of that, there's ample upside to that plan from drop-down transactions with CNX Resources, as well as other acquisitions and investment opportunities. These factors make CNX Midstream worth a closer look for those seeking a growing income stream.